TMI Blog2014 (11) TMI 349X X X X Extracts X X X X X X X X Extracts X X X X ..... tion by CIT to revise the orders u/s 263 on an issue which was already concluded by earlier order cannot be justified – relying upon CWT vs. Darshan Singh [2004 (8) TMI 74 - PUNJAB AND HARYANA High Court] - the additional grounds raised by assessee in these two years that CIT order u/s 263 revising a subsequent order u/s 147 on an issue which did not arise in that order was barred by limitation. The re-computation under the head “Business” would result in granting more depreciation and as rightly demonstrated by assessee in respective years, the computation will result in carrying forward more unabsorbed depreciation to the assessee not only in the impugned years but also in later years upto A.Y. 2012- 2013 - the incomes in the A.Ys. 2007-2008 and 2009-2010 were ultimately assessed under section 115JB on book profits as the normal computation resulted in losses or NIL income - the orders are not prejudicial to the interests of Revenue in any of the AYs - When this was pointed out by assessee in the course of proceedings u/s 263 by giving a detailed workings, CIT not only ignored them but even rejected them on the reason that assessee was entitled for 10% depreciation, whereas, 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.2. The learned CIT erred in observing that since the appellant is not entitled to a deduction under section 32(iia) of the Act, the assessment order is prejudicial to the interest of the revenue although the appellant did not make any such claim in its return of income nor this formed the basis of the show cause notice invoking jurisdiction under section 263 of the Act. Ground No.2 : Business Income vs. Income from House Property. 2.1. The learned CIT erred in holding that rental income earned on letting out the immovable property is to be assessed as Business Income and not as Income from House Property as returned by the appellant and accepted in the assessment proceedings. Ground 3: Depreciation on assets. 3.1. Without prejudice to Ground 2, in case the income of the appellant is classified as Business Income instead of Income from House Property , the appellant ought to have been allowed depreciation in respect of its assets, including the buildings and fittings and machinery therein. The appellant prays, for the following relief : (a) The Hon ble Tribunal be pleased to hold that the assessment order dated December 30, 2011 is not erroneous and prejudici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6,210. The return was accepted u/s 143(1). Later, A.O. reopened on the reason of receipt of Subsidy and completed the assessment under section 143(3) read with section 147 vide order dated 30.12.2011. For AY 2009-10 the assessment was completed u/s 143(3). In all these years assessee s computation of income was accepted, assessing the rental income under the head Income from House Property and services income under the head Profit and Gains of Business or profession . 5. Ld. CIT issued notice dated 17.02.2014 for the impugned years asking the assessee to file its objections why the rental income also not be treated as income under the head profits and gains of business or profession in line with the judgment of ITAT, Bangalore in the case of M/s. Global Tech Park P. Ltd., vs. CIT 119 TTJ 421. 6. Assessee filed its objections, which are partly extracted by Ld. CIT in the order, contesting that the orders passed by A.O. are neither erroneous nor prejudicial to the interests of Revenue. As far as the erroneous part of the order is concerned, assessee submitted that the incomes were correctly offered under the head Income from House Property and relied on the judgment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial to the interests of Revenue. 7.1 Gist of the objections of assessee are summarized by Ld. CIT as under : a) The order of the AO is neither erroneous nor prejudicial to the interests of Revenue. Even if it is presumed that the order is erroneous, the same is not prejudicial to the interests of Revenue. b) For consistency purpose, the case needs to be considered from A.Y 2004-05 and the assessee submitted computation for all the years starting from A.Y 2007-08 stating that it is the oldest year that can be reopened. According to the assessee, there is no change in tax computation even if the income is assessed as business income. c) The heads of income prescribed in the Income Tax Act are mutually exclusive and the case of the assessee falls under the category of House Property . d) The assessee is showing rental receipts and receipts from services separately. e) Even if the assessee is in the line of business of letting, the income would fall under the head of House Property as the Income Tax Act clearly mandates such heads. f) The assessee relied on various case laws including that of Apex Court and also stated that the decision of Bangalore Bench of IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see is a joint venture of K. Raheja Group Private Ltd and APIIC Ltd. In pursuance of the JV agreement, APIIC allotted land to the assessee at concessional rate for developing, marketing and selling. Also adequate number of jobs need to be created by the assessee, which clearly shows that the entire activity is aimed at industrial development and employment generation in the State of AP and not simple letting of properties. In the Directors' report also the project is described as business activity of infrastructure development. Efforts in marketing and job creation are also explained in detail. f) If the assessee was simply letting out the property, the income would probably fall under income house property . If he is engaged in organized activity of exploiting commercial assets for business purpose, the income would be from business. No doubt, the heads of income are mutually exclusive. Yet, a receipt can manifest in different forms depending on the context making it fit into an appropriate head of income, suiting such context. g) In the case of Tuticorin Alkali Chemicals Fertilizers Ltd (227 ITR 172), the Apex Court held that where question is taxability of a certai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... self be meaningless. m) It is also incorrect on the part of the assessee to state that the order is not prejudicial to the interests of revenue because the claim of additional depreciation would offset the gains. The assessee would not fit into the ambit of section 32(iia) as he is not producing any article or thing nor he is engaged in generation or distribution of power. Besides, the prime assets of the assessee are the buildings, which do not fall under the definition of plant. n) The A.O. did not examine any of these facts and allowed the claim without any verification. Therefore, judicious view was not taken by him to state that he took one of the possible views. o) In the case of Boston Analytics Ltd (20 12-TIOL- 605-ITAT-MUM), the Mumbai bench of ITAT held that The view taken by the AO should not be a mere view in vacuum but a judicial view . p) As per decision of the Chennai Bench of ITAT in the case of Bharat Overseas Bank Ltd ( 152 TT J 546) (Chennai) (Trib.), When the order of the Assessing Officer was silent on the claim made by assessee, and allowed such claim, without any discussion, it was held that such an order was erroneous and prejudicial to the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n explained the propositions laid down in the decision of Hon ble Supreme Court in the case of East India Housing and Land Development Trust Ltd., vs. CIT 42 ITR 49 and then the facts in the case of M/s. S.G. Mercantile Corporation P. Ltd., 83 ITR 700 to submit that the decision of the Hon ble Supreme Court there also supports assessee s contention. It was submitted that liability to tax under the head House Property is on the owner of the building or land appurtenant thereto which is facts in assessee s case. In the case of M/s. S.G. Mercantile Corporation P. Ltd., (supra) assessee is developing the properties on lease basis and is not owner of the property. This finding is given in page 705 of the above said judgment of the Hon ble Supreme Court. Therefore, in that case, the incomes were held not to be assessed under the head House Property . Ld. Counsel also distinguished the facts in the case of Global Tech Park P. Ltd., (supra) which relied on the Hon ble Karnataka High Court Judgment in the case of Balaji Enterprises vs. CIT 225 ITR 471. It was submitted that in the case of Balaji Enterprises (supra) the facts are that the firm took property on lease to build structures th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m rentals under the head Income from House Property and service income under the head Business . It was accordingly assessed by A.O. subject to small modifications. For A.Y. 2006- 07 the order under section 143(3) was passed on 31.10.2008. Therefore, the time limit for reopening the assessment actually on this issue starts from this date and ends on or before 31.03.2011. The assessment can be revised i.e., two years from the end of A.Y. in which the order was passed. As far as A.Y. 2007-08 is concerned, there was no order under section 143(3) but there is an intimation under section 143(1) dated 30.09.2008. Therefore, the issue whether the income was to be considered as income from business or house property got concluded by the intimation and non-selection of scrutiny at that point of time. In these two years what the Ld. CIT, as specified in the order under section 263, revised the orders passed on 30.12.2011 in these years consequent to the proceedings under section 147 with reference to receipt of subsidy of ₹ 3,07,20,000 in A.Y. 2006-07, ₹ 20,51,60,000 in A.Y. 2007-08. As seen from the orders, the issue which was decided in those years in later order was with re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not deal with the question of valuation of interest of the assessee in theatre which had become final as per order dt. 8th March, 1978. The CWT could not have exercised powers against the said order as the limitation under s. 25(3) which is two years, had also expired with regard to the said order. The Tribunal, was right in vacating the order of the Commissioner of Wealth Tax . 14.1. As considered in the above decision, the orders sought to be revised i.e., order dated 30.12.2011 did not deal with the question of assessing under the correct head but only the issue of subsidy has been dealt with. The issue of accepting under the correct head was already concluded at the time of original assessment finalized vide order dated 31.10.2008 for A.Y. 2006-07. Likewise, even though the order under section 143(3) was not passed, intimation under section 143(1) was already issued in A.Y. 2007-08 and in the reopening assessment the issue was not taken-up by A.O. at all. At least, for the A.Y. 2006-07, the orders sought to be revised has barred by limitation. As per the provisions of the Act, even an intimation under section 143(1) also becomes an assessment after expiry of the period for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f limitation. The period of limitation in this case is two years from the date of order sought to be revised i.e., 16th Dec., 1988, but the order of CIT under s. 263 is dt. 26th Feb., 1992, i.e., beyond two years. The order of revision was barred by limitation. . 15.1. Following the principles laid down above, we uphold the additional grounds raised by assessee in these two years that Ld. CIT order under section 263 revising a subsequent order under section 147 on an issue which did not arise in that order was barred by limitation. 16. Apart from the above, even on merits, we are of the opinion that the order of A.O. is neither erroneous nor prejudicial to the interests of Revenue so as to revise the same under section 263. Assessee has been consistently offering the incomes under the head Income on House Property as far as the receipts of rents are concerned and under the head Business as far as the service fee and management fee on maintenance are concerned. Not only in the impugned years, even in earlier years also, the incomes were accepted as such. Since the Ld. CIT cannot revise those orders, these orders are not subject matter of proceedings u/s 263 and therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od of lease, the conditions of lease etc., also required to be examined. Therefore, in order to take a decision whether a particular income is to be assessed under the head House Property or under the head Business many more facts are required to be examined. In this case, neither the A.O. nor the Ld. CIT examined any of these aspects, but decided simply on the principles of law. Therefore, we are unable to give any finding about the correctness of the action of either A.O. or Ld. CIT in coming to a particular conclusion whether the income is assessable under House Property or Business in the absence of facts in these years. 18. However, as far as the law is concerned, the Hon ble Supreme Court as early as 42 ITR 49 in the case of East India Housing and Land Development Trust Ltd., vs. CIT on the following facts held as under : The appellant company, which was incorporated with the objects of buying and developing landed properties and promoting and developing markets, purchased 10 bighas of land in the town of Calcutta and set up a market therein. The question was whether the income realized from the tenants of the shops and stalls was liable to be taxed as busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, for use of lifts, for the supply of hot and cold water, for the arrangement for scavanging, for providing watch and ward facilities as well as other amenities. The Tribunal further found that the assessee-company purchases from the Calcutta Electric Supply Corporation high voltage A.C. current in bulk, converts the same into low voltage A.C. current in the company's own power house within the premises and supplies the power to its tenants. It also maintains a separate water pump-house and a boiler for the supply of hot and cold water to the tenants. The company further provided for the benefit of tenants, electric lifts working day and night. The further finding of the Tribunal was that for all these purposes the assessee-company maintains a large number of permanent staff. The company claimed that the entire receipts from the tenants should be treated as income from business as it had been formed for carrying on the business of letting out flats and shops. The Income Tax Officer rejected its claim but split the receipts into two parts, one part being treated as rent and the other as income from other sources taxable under section 12 of the Income Tax Act, 1922. The Appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The appellant s activity during the period covered by the assessment years 1956- 57 to 1958-59 consisted of developing the property and letting out portions thereof as shops, stalls and ground spaces to shopkeepers, stallholders and daily casual market vendors. The question was whether the appellant s income from subletting the stalls was assessable as business income under section 10 of the Income Tax Act, 1922, or as income from othe sources under section 12 : Held : (i) that since the appellant-company was not the owner of the property or any part thereof, no question of making the assessment under section 9 arose ; (ii) that the definition of business in section 2(4) was of wide amplitude and it could embrace within itself dealing in real property as also the activity of taking a property on lease, setting up a market thereon and letting out shops and stalls in the market; (iii) that, on the facts, the taking of the property on lease and subletting portions thereof was part of the business and trading activity of the appellant and the income of the appellant fell under section 10 of the Act ; and (iv) that where, as in this case, the income could appropriately f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered that he has formed an opinion of accepting assessee s rental income under the head Income from House Property and allowing the claims as per that Head rather than allowing depreciation on assets, if it is converted to income from business. Since the A.O. formed an opinion not only in the impugned assessment years but also in earlier years, we are of the opinion that the Ld. CIT opinion that the same is to be assessed as business income will fall under the category of difference of opinion. If A.O. has taken one of the opinion available out of the two, the Ld. CIT cannot invoke jurisdiction under section 263. Provisions of section 263 does not permit substituting one opinion by another opinion. Therefore, the order of Ld. CIT cannot be sustained on the principles of erroneous nature of A.O. order, as it is not erroneous. 20. Coming to the issue of prejudicial to the interests of Revenue , as rightly pointed out by Ld. Counsel as per the workings placed in the paper books, the re-computation under the head Business would result in granting more depreciation and as rightly demonstrated by assessee in respective years, the computation will result in carrying forward ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have already held that the claim of depreciation under the head Business is much more than the claims made under Income from House Property which results in not only working out higher losses / depreciation in the impugned years but also in later years as demonstrated before Ld. CIT by way of detailed working by assessee. In view of this, we certainly hold that the orders of A.O. are not prejudicial to the interests of Revenue. 22. As briefly stated above, we are unable to give any finding whether the incomes are to be assessed under the head Business or under the head House Property in the impugned assessment years in the absence of complete details. Suffice to say that for analyzing the issue in respect of jurisdiction under section 263 by Ld. CIT, we are convinced that the orders of A.O. are not either erroneous or prejudicial to the interests of Revenue. In A.Ys. 2006-07 and 2007-08, since the issues were concluded in earlier orders and not in the orders sought to be revised, they are also time barred. In view of this, in all the impugned assessment years assessee s contentions are accepted and the orders of Ld. CIT under section 263 are set aside. We restore the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X
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